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(Note: the following commentary was co-authored with Tory Wolff, a founding partner of Recon Strategy, a healthcare strategy consulting firm in Boston; Tory and I gratefully acknowledge the insightful feedback provided by Jay Chyung of Recon Strategy.)

Medicine has been notoriously slow to embrace the electronic medical record (EMR), but, spurred by tax incentives and the prospect of cost and outcomes accountability, the use of electronic medical records (EMRs) is finally catching on.

There are a large number of EMR vendors, who offer systems that are either the traditional client server model (where the medical center hosts the system) or a product which can be delivered via Software as a Service (SaaS) architecture, similar to what salesforce.com did for customer relationship management (CRM).

Historically, the lack of extensive standards have allowed hospital idiosyncrasies to be hard-coded into systems. Any one company’s EMR system isn’t particularly compatible with the EMR system from another company, resulting in – or, more fairly, perpetuating – the Tower of Babel that effectively exists as medical practices often lack the ability to share basic information easily with one another.

There’s widespread recognition that information exchange must improve – the challenge is how to get there.

One much-discussed approach are health information exchanges (HIE’s), defined by the Department of Health and Human Services as “Efforts to rapidly build capacity for exchanging health information across the health care system both within and across states.”

With some public funding and local contributions, public HIE’s can point to some successes (the Indiana Health Information Exchange, IHIE, is a leading example, as described here). The Direct Project – a national effort to coordinate health information exchange spearheaded by the Office of the National Coordinator for Health IT – also seems to be making progress. But the public HIEs are a long way from providing robust, rich and sustainable data exchange.

In their stead, private HIEs – serving collections of collaborating hospitals and providers -- seem to account for the lion’s share of growth in the HIE space. In particular, one company – Epic (discussed recently by Forbes colleague Zina Moukheiberhere) – seems to have emerged as top dog in the large hospital space, winning contracts from most of the nation’s most prestigious centers, and many of the nation’s largest; a deal with Boston powerhouse Partners Healthcare was recently announced. (Another leading EMR contender, Cerner, is profiled this week by another Forbes colleague, Matthew Herper.)

Notably, Epic is built on a traditional client server model, and does individual, customized installations for each client; a reputation for near-flawless implementation -- derived by tightly constraining how much idiosyncracy is engineered in each install -- has been a prime driver of growth. While Epic systems seem to be able to communicate with other Epic systems with relative ease, communication outside of Epic seems more problematic.

The ambulatory practice space, on the other hands, appears to remain highly fragmented and largely up for grabs, as a number of competing companies – particularly SaaS-based approaches such as AthenaHealth, PracticeFusion, and eClinicalWorks seek to gain traction.

Add to the mix the observation that medicine is undergoing a general consolidation, as solo practices and small practices increasingly find themselves in the arms of larger hospital systems, which are also merging. No wonder so many practices are still reluctant to adopt EMR given all the uncertainty (why buy or upgrade a system if we are going to sell the practice?) and confusion (which system to buy given the cacophony of brands, acronyms and regulations we don’t understand).

So how is all this likely to play out? The first question, as we see it, will be whether Epic, essentially a private system, will be able to dominate the EMR space (hospital and outpatient) before alternatives – likely utilizing SaaS and leveraging an expanding array of national interoperability standards, can gain traction; the second question is what are the likely consequences of Epic winning – and of Epic losing.